Brina Gap measures the difference between the growth a business can fundamentally sustain and the growth the market is already pricing in.
Formula: Fundamental Growth Rate − Market-Implied Growth Rate
The Two Components:
Fundamental Growth Rate = ROIC × Reinvestment Rate
What the business can sustainably grow at based on how much it reinvests and what return it earns on that capital. Grounded in historical financials.
Market-Implied Growth Rate = Reverse DCF
The growth rate the current Enterprise Value implicitly assumes. Calculated by back-solving a 10-year DCF model (10% WACC, 3% terminal growth) until the present value of projected cash flows equals EV.
What The Gap Means:
Gap > +5%
Market Underestimates — potential upside
+2% to +5%
Slight Underestimate
-2% to +2%
Fairly Priced — market consensus matches fundamentals
-5% to -2%
Slight Overestimate
Gap < -5%
Market Overestimates — price embeds optimism fundamentals don't support
A positive gap (market underestimates) combined with a positive Margin of Safety is the strongest combined signal — the business is both cheap historically and forward economics are stronger than the price suggests.